A mix of geopolitical, economic and climate challenges mean the global economic outlook will remain unsettled in 2024, directly impacting consumer confidence and spending in major fashion markets, according to The State of Fashion 2024, the highly-anticipated report jointly published by The Business of Fashion (BoF) and McKinsey & Company.
The report identifies 10 key focus areas for the fashion industry in the year ahead, supported by insight from two proprietary global surveys of fashion executives and consumers.
- Fashion industry executives are divided about what to expect next year, with 26% expecting conditions to improve, 37% saying things will remain the same and 38% predicting conditions will get worse.
- Industry growth is forecasted to be just 2 to 4%, with potential bright spots coming from a rebound in global tourism to 10% above pandemic levels in 2019 and the opportunities presented by generative artificial intelligence.
Generative AI and its potential transformative impact on fashion creativity
2023 was a breakout year for gen AI, fuelled by $14.1 billion of funding for AI-focussed startups in the first half of the year alone. As for the fashion industry specifically, approximately 25% of gen AI’s potential value may be driven by its use in design and product development, according to new analysis in the report.
However, despite fashion executives’ high expectations for gen AI, they also acknowledge a significant knowledge and talent gap in their businesses, which could prevent businesses from fully leveraging the technology soon. 73% of fashion executives said gen AI will be a priority for business in 2024, but only 28% have tried using it in creative processes and only 5% believe their employees currently have the requisite skills to tap into its potential.
Global travel to surpass pre-pandemic levels
Consumers are preparing for their biggest year of travel since the pandemic, with global tourism projected to exceed 2019 levels by up to 10% in 2024. More than ever, this represents a lucrative window for brands, particularly as shopping is high on travel agendas; 80% of surveyed shoppers from the US, UK and China plan to shop for fashion while on holiday, and 28% expect to spend more on fashion shopping while travelling than the previous year.
Consumers are also now open to adding second-tier cities to their itineraries, while over half expect to visit destinations they have not previously been to in the year ahead. Moreover, the report finds there is a post-pandemic shift in consumer behaviours in terms of their expectations about how, when and where they connect with brands and retailers while on the road. Fashion executives should adjust their global strategies accordingly to benefit from this travel rebound.
The new age of influence: Authenticity over status
Influencer marketing — an industry currently worth $21.1 billion — will continue to be a key way for brands to connect with consumers. However, consumers are showing signs of “influencer fatigue.” The report reveals 68% of surveyed consumers are unhappy with the amount of sponsored content on social platforms and 65% rely on influencers less than previous years.
The insights indicate a new trend for 2024, where people interact less with influencers that promote a polished, aspirational lifestyle and move towards those they deem authentic and fun. Survey respondents praised traits such as relatability (43%) and authenticity (40%) over celebrity status (15%) and expertise in fashion (23%). In response to these preferences, brands are looking to diversify the type of talent that they partner with.
Climate crisis’ $65 billion risk to the industry
The frequency and extremity of climate-related catastrophes in 2023 means climate change is impossible to ignore. In real terms, it poses a significant risk to the fashion industry’s growth as data from the report predicts extreme weather events could jeopardise $65 billion worth of apparel exports and threaten one million jobs in four major economies by 2030. Additionally, 90% of exported goods are reliant on shipping, but an estimated $122 billion of economic activity at ports are at risk from disruptions caused by extreme weather events.
Every part of the fashion industry is affected by climate change, from the production of raw materials to supply chains and logistics. These are set to come under increased scrutiny next year with new sustainability rules in Europe and the US that will require brands and manufacturers to double down on initiatives that reduce emissions and waste, while protecting natural resources and embed climate strategies across their businesses.
The report found that just 12% of executives cite sustainability as a principal opportunity for 2024, as fashion’s C-suite acknowledges that a number of other challenges will vie for their attention in the year ahead.
Imran Amed, founder and CEO of The Business of Fashion, said: “From the intensifying climate crisis to the transformative potential of AI, The State of Fashion 2024 dissects key challenges and opportunities for the global fashion industry next year. But fashion leaders cannot rest on their laurels. While they must approach 2024 with caution, it is critical to continue seeking targeted opportunities for growth and innovation.”
Achim Berg, senior partner at McKinsey said: “The fashion industry once again demonstrated remarkable resilience in 2022. The luxury segment in particular propelled growth through price increases, partially offsetting the weaknesses of other segments. While there are many challenges ahead for the global fashion industry in the coming year – mainly driven by volatility and uncertainty due to macroeconomic developments – we expect limited global growth of about 2-4% in 2024. Luxury’s global retail sales growth is forecast to slow to between 3 – 5% in 2024, due to consumers restraining spending after a post-pandemic shopping surge.”
Gemma D’Auria, senior partner and global leader of McKinsey’s Apparel, Fashion and Luxury Group, said: “The rise of Generative AI provides a creative crossroad for the fashion industry: We are already seeing multiple use cases emerging. To capture the value of this transformative technology in the coming year will require fashion players to look beyond automation and explore Gen AIs potential to expand the work of human creatives.”
The 10 themes outlined in The State of Fashion 2024 report are:
- Fragmented Future:In 2024, the global economic outlook will continue to be unsettled in major fashion markets, directly impacting consumer confidence and spending. Consumers’ net intent to spend on apparel is -16% across the US, Europe and China in the fourth quarter of 2023.
- Urgency: The climate crisis has become more visible over the past year. Time is running out for fashion brands to build resilience into their value chains to address the climate risk and double down on efforts to reduce emissions. An estimated $65 billion of apparel exports are at risk of being wiped out by climate events such as flooding and extreme heat by 2030.
- Vacation Mode: Consumers are preparing for their biggest year of travel since the pandemic, and brands have an opportunity to revamp distribution and other strategies to engage travelling customers. In 2024, global travel volumes are projected to reach up to 110% of 2019 levels, the first year to exceed pre-pandemic levels.
- The New Face of Influence: A new guard of influencer is gaining popularity as fashion consumers gravitate towards less-polished, but more entertaining and even quirky influencers. More than 40% of consumers prefer fashion influencers who are relatable and authentic.
- Outdoors Reinvented: Technical outdoor wear has witnessed a boom in popularity that is likely to continue into 2024, amid expectations that more outdoor brands could release lifestyle collections while fashion brands potentially expand outdoor wear offerings.Trade activity on resale platforms like StockX for Salomon, Arc’teryx and The North Face grew on average 800% year on year in 2023.
- Gen AI’s Creative Crossroad: AI has been one of the buzzwords of the year. In order to use this technology correctly, brands will need to look beyond automation and explore the potential for AI to augment the work of human creatives. 73% of fashion executives think gen AI is a 2024 priority for their companies, but only 5% believe they have the capabilities to fully leverage it.
- Fast Fashion’s Power Plays: Competition among fast-fashion brands will intensify in the year ahead. Success for both new and incumbent players will hinge on their ability to adapt to customer tastes and navigate new regulations that will impact the industry. 40% of US consumers have shopped at 3rd generation fast fashion in the last 12 months.
- All Eyes on Brand: Brand marketing will re-emerge, as businesses can no longer solely rely on performance marketing. 71% of fashion executives plan to increase brand marketing spend in 2024.
- Sustainability Rules:Incoming regulations could soon reshape fashion businesses. Brands should revamp their business models to align with the regulatory changes ahead. 87% of fashion executives expect sustainability regulations to impact their businesses in 2024.
- Bullwhip Snaps Back:If supply is to keep pace with anticipated demand, businesses should consider bolstering strategic partnerships with manufacturers to avoid supply chain volatility. 73% of chief procurement officers cited demand volatility as a dynamic that may impact supplier relationships in the next five years.
The State of Fashion 2024 will be presented on 29 November during BoF VOICES 2023, The Business of Fashion’s annual gathering of big thinkers that explores the intersection of fashion, business, technology, culture, and politics in today’s complex world. Taking place in person and via livestream, this year’s speakers include Global Chanel CEO Leena Nair, Gap Inc CEP Richard Dickson, Bottega Veneta’s Matthieu Blazy, Loewe’s Jonathan Anderson, Diane Von Furstenberg and more. To find out more, visit https://pages.businessoffashion.com/bof-voices-2023/
